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44 Cards in this Set
- Front
- Back
Transaction
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Any event that has a financial impact on the business and can be measure reliably. (sells merchandise, borrow money, repay loan, etc.)
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Two sides of transaction
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1. Give something
2. Receive something in return ALWAYS record BOTH sides |
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Account
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record of all changes in a particular asset, liability, or stockholders' equity during a period. The basic summary device of accounting.
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Cash
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money and any medium of exchange (bank account balances, paper currency, coins, certificate of deposit, and checks.
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Account Receivable
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companies sells its goods and services and receives a promise for future collection of cash.
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Notes Receivable
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More formal way of a customer promising to pay. It is more binding because the customer signed the note
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Accounts Payable
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Promise to pay a debt arising from a credit purchase of inventory
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Notes Payable
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Business signs a note promising to pay. Also carries interest.
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Accrued Liabilities
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expense you have not yet paid. (interest payable, salary payable, income tax payable)
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Common Stock
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Most basic element of equity.
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Retained Earnings formula
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Revenue – Expense – Dividends = Net income/ Net loss
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Income Statement appears as ___ and ___ on ____
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Revenue, expenses, retained earnings
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Cash Receipt
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Increase cash
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Cash Payments
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Decrease cash
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Where does the data for the statement of cash flows align under
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Cash account
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Debit
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goes on the left side
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Credit
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Goes on the right side
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Double-entry Accounting
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Every transaction affects at least two accounts
at least a debit and a credit |
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Increase asset
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Debit
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Decrease asset
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Credit
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Increase liabilities
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Credit
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Decrease liabilities
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Debit
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Increase stockholder's equity
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Credit
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Decrease Stockholder's equity
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Debit
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T-account
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method of recording transactions and keeping track of the dollar amount in particular account.
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Fra Luca Pacioli
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father of Accounting
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Debit increases
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expenses, dividends, assets
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Credit increases
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common stock, retained earnings, revenue, liabilities
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Journal
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Chronological record of transactions that impact the financial position of a business
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Three steps of the journalizing process
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1.Identify accounts impacted by transaction
2.Apply debit/credit rules to increase or decrease the accounts Remember - have at least one debit and one credit 3.Record transaction in the journal |
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Journalizing
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Write the account debited first
and the amount in the left column Write (and indent) the account credited next and the amount in the right column |
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Posting
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Transferring information
from the journal to the ledger |
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Ledger
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a collection of accounts and their balances
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Journal is also known as
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Book of original entry
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Ledger
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grouping of all T-accounts
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Posting
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the process of copying data to the ledger
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Flow of accounting data
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Transaction occurs → Transaction analyzed → Transaction entered in journal → Amounts posted to the Ledger Accounts
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Trial Balance
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Lists all accounts with their balances- assets first, then liabilities, and stockholders' equity. Shows the total debits equal total credits.
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The Trial Balance facilitates....?
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The preparation of the financial statements.
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3 Steps to finding an error
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1. Search the records for a missing account
2. Divide the out-of balance amount by 2 3. Divide the out balance amount by 9. If the result is an integer (no decimals), the error may be a 1. Slide (writing $400 as $40) the out balance would be (400-40= 360) dividing $360 (the out balance) by 9 gives $40- the error. 2. Transposition- (writing $2100 as $1200). The out balance would be $900 (2100-1200). Dividing by 9 gives $100. |
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Balance Sheet Accounts (Ledger) has
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Assets, liabilities, and stockholders equity
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Chart of Accounts
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Used to list their accounts and account numbers
1. Assets 2. Liabilities 3. Stockholders Equity 4. Revenue 5. Expenses |
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Normal Balance
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falls on the side of the account (debit or credit) where increases are recorded. (Debit balanced accounts, credit balanced accounts)
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Accrued Liability
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a liability of an expense not yet paid by the company
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